What happens if the member of a SSAS dies?
SSAS death benefits explained
A comprehensive guide to Pensions and Investments for Investing in Property
Family members (and other dependants) can access the funds in a Small Self Administered Scheme (SSAS) if the SSAS member dies, but there are restrictions. It’s possible for a lump sum to be paid to a nominated beneficiary completely tax free, making an SSAS an excellent inheritance planning tool — if used properly.
However, this depends on specific circumstances, including whether or not the member has started drawing funds from the SSAS and how old the SSAS member was when they died.
Family members will be able to access an SSAS if a member dies before drawing the funds. The simplest option is to pay a lump sum to a person nominated in writing. Lump sums are typically free from all kinds of tax, including inheritance tax, income tax and pension tax. There is however, an exception: If contributions are made to the SSAS in the two years prior to death, as an attempt to reduce the SSAS member’s estate, this money may be liable for inheritance tax.
Alternatively, the amount can be paid as pension income to a dependant. In this case, income tax must be paid on the amount and the recipient must be a dependant.
If the SSAS member dies before drawing funds and was over 75, the benefits are paid out as if from a drawdown fund.
A lump sum paid out from a drawdown fund is taxed at 55%. You can pay anyone nominated in writing from a drawdown fund.
Money from a drawdown fund may be paid as income pension to a dependant as normal, which would be subject to income tax.
If you have no surviving dependants, the money from a drawdown fund may be paid to a nominated charity, without any tax deductions.
The Lifetime Allowance is a limit on the amount that can be taken from a pension scheme, either as a lump sum or as retirement income, and can be paid without triggering an extra tax charge. The amount drawn from a SSAS — or paid as a lump sum to a beneficiary — is tested against the lifetime allowance. As of April 2018, the lifetime allowance in the UK is £1,030,000.
A lifetime annuity is a product that you can buy with your pension fund, which guarantees an income for life. If you’re a member of an SSAS and you’re drawing funds, you can use these funds to purchase an annuity. However, it’s vital you carefully check the terms of the annuity. When the recipient of an annuity dies, a lump sum may be paid to a dependant or there might be a minimum term of payments from the annuity to a dependant.
Need specific pension investment advice?
Read our guides on SSAS Pensions:
- SSAS vs SIPP pensions
- What is a Self-Administered Pension?
- How To Set Up A SSAS pension
- What kind of regulations and protections are there for SSAS?
- What Can an SSAS Pension Invest In?
- What are SSAS death benefits
- HMRC Rules
Still unsure about something? Please don’t hesitate to contact us about enquiries relating to pensions and investments in property.
What our customers say...
Genuine professional people delivering top notch quality customer service accompanied with the all important experience and in-depth knowledge of this business field.Many thanks in particular to Gareth and Teresa for their unswerving support advice and guidance over these past few years since I took up the challenge of looking after... Read moreNick Clement
From the very beginning of the journey to re gain control of my pension and earn higher interest, the landlords pension were and still are extremely professional, they made the whole process very easy and explained the whole process. BRILLIANT 5 star service and 2 years on and all is good.Ben Garner
You get nothing but the best advice to use your pension in the correct manner. Setting up a SASS is not as daunting as one would think, it is the best thing I ever did. Being introduced to the Dolphin scheme to make my pension work hard was a no... Read moreSelwyn Browne
Massive thanks to Laura and Teresa in helping set up the SASS. Great communications throughout and always on hand to answer queries.We are just about to embark on the investment side of things now the pensions have been transferred into the SASS and the range of investment opportunities give me... Read moreDamian Spencer
The Landlord’s Pension is an expert in this niche sector of financial planning and have been helping clients to invest in property since 2004